'Does Private Equity Deserve a Public Bailout?' diff viewer (4/5)

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Does Private Equity Deserve a Public Bailout?	Does Private Equity Deserve a Public Bailout?
2020-06-09 22:00:22 UTC	2020-06-13 03:50:57 UTC (3 days later)
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Steven Davidoff Solomon, a.k.a. “The Deal Professor,” is the faculty director at the Berkeley Center for Law, Business and the Economy	Steven Davidoff Solomon, a.k.a. “The Deal Professor,” is the faculty director at the Berkeley Center for Law, Business and the Economy
In the competition for a federal bailout, venture capital won the first round. Now, private equity is fighting back — and winning.	In the competition for a federal bailout, venture capital won the first round. Now, private equity is fighting back — and winning.
The first round was the $350 billion Paycheck Protection Program, which provides forgivable loans of up to 2.5 times companies’ monthly payroll. The program is limited to businesses with no more than 500 employees, and it specifically excludes financial firms.	The first round was the $350 billion Paycheck Protection Program, which provides forgivable loans of up to 2.5 times companies’ monthly payroll. The program is limited to businesses with no more than 500 employees, and it specifically excludes financial firms.
Businesses are flocking to the program, but the Small Business Administration initially barred most companies that are funded by venture and P.E. firms. The administration’s affiliate rule lumps together businesses with common controlling shareholders, so all of a firm’s majority-owned businesses count toward the employee limit. Private equity has lobbied vociferously for a waiver, but the government has not granted one.	Businesses are flocking to the program, but the Small Business Administration initially barred most companies that are funded by venture and P.E. firms. The administration’s affiliate rule lumps together businesses with common controlling shareholders, so all of a firm’s majority-owned businesses count toward the employee limit. Private equity has lobbied vociferously for a waiver, but the government has not granted one.
For most venture-backed companies, the problem is not majority ownership, but that the affiliate rule covers companies where an investor has “negative control” rights, like the ability to veto board decisions. Faced with forgoing a potential government grant or losing control rights, venture firms have rushed to eliminate these rights. Their extensive banking relationships also make them more attractive to lenders than unfamiliar mom and pop businesses.	For most venture-backed companies, the problem is not majority ownership, but that the affiliate rule covers companies where an investor has “negative control” rights, like the ability to veto board decisions. Faced with forgoing a potential government grant or losing control rights, venture firms have rushed to eliminate these rights. Their extensive banking relationships also make them more attractive to lenders than unfamiliar mom and pop businesses.
This only remaining issue for venture firms is a moral one: Do they really need these loans? After all, V.C. and P.E. funds have nearly $1.5 trillion in uncalled capital, otherwise known as dry powder. The number of venture-backed companies that refused to participate in the program is unknown, but anecdotally there are some.	This only remaining issue for venture firms is a moral one: Do they really need these loans? After all, V.C. and P.E. funds have nearly $1.5 trillion in uncalled capital, otherwise known as dry powder. The number of venture-backed companies that refused to participate in the program is unknown, but anecdotally there are some.
The second round of bailout wrangling is where private equity is coming out on top.	The second round of bailout wrangling is where private equity is coming out on top.
Apollo successfully lobbied for another Fed program — the $100 billion Term Asset-Backed Securities Loan Facility — to purchase a wider range of investment-grade securities, particularly the mortgage-backed and commercial real estate debt popular among many P.E. firms. The need for this is obvious: If landlords don’t get paid (however politically popular that is) there are mass disruptions to the economy. P.E. firms can also get in on the Fed’s $600 billion Main Street Business Lending Program for midsize companies.	Apollo successfully lobbied for another Fed program — the $100 billion Term Asset-Backed Securities Loan Facility — to purchase a wider range of investment-grade securities, particularly the mortgage-backed and commercial real estate debt popular among many P.E. firms. The need for this is obvious: If landlords don’t get paid (however politically popular that is) there are mass disruptions to the economy. P.E. firms can also get in on the Fed’s $600 billion Main Street Business Lending Program for midsize companies.
There’s widespread criticism of bailing out P.E. funds. But whatever you think about this, public pensions are dependent on private equity investments for returns, and their portfolio companies employ millions. Frankly, the industry is too politically savvy to let these critical arguments stand in the way.	There’s widespread criticism of bailing out P.E. funds. But whatever you think about this, public pensions are dependent on private equity investments for returns, and their portfolio companies employ millions. Frankly, the industry is too politically savvy to let these critical arguments stand in the way.
I would expect the next round of stimulus to be even more friendly to private equity. Unlike venture funds, P.E. financiers do not have the same moral misgivings about lobbying aggressively for federal assistance.	I would expect the next round of stimulus to be even more friendly to private equity. Unlike venture funds, P.E. financiers do not have the same moral misgivings about lobbying aggressively for federal assistance.
As the Trump administration pushes back against reports about perceived delays in its initial response to the coronavirus outbreak, it is also suggesting that it will soon lift restrictions on the economy. “We’re very close to completing a plan to open our country. Hopefully, even ahead of schedule,” President Trump said yesterday.	As the Trump administration pushes back against reports about perceived delays in its initial response to the coronavirus outbreak, it is also suggesting that it will soon lift restrictions on the economy. “We’re very close to completing a plan to open our country. Hopefully, even ahead of schedule,” President Trump said yesterday.
Who’s on the council to reopen America? A task force has been established for the lifting of restrictions, but its membership remains a mystery. Input will also come from existing committees and unnamed business leaders, administration officials suggest.	Who’s on the council to reopen America? A task force has been established for the lifting of restrictions, but its membership remains a mystery. Input will also come from existing committees and unnamed business leaders, administration officials suggest.
• The U.S. Chamber of Commerce sent a letter to members detailing the (many) questions that must be answered before all businesses reopen. “We don’t have all the answers today — or even all the questions,” it said.	• The U.S. Chamber of Commerce sent a letter to members detailing the (many) questions that must be answered before all businesses reopen. “We don’t have all the answers today — or even all the questions,” it said.
• Peter Navarro, the White House trade adviser, told Alan Rappeport of The Times that medical experts and others pushing for a prolonged shutdown were “tone deaf” to the dangers:	• Peter Navarro, the White House trade adviser, told Alan Rappeport of The Times that medical experts and others pushing for a prolonged shutdown were “tone deaf” to the dangers:
“They piously preen on their soap boxes speaking only half of the medical truth without reference or regard for the other half of the equation, which is the very real mortal dangers associated with the closure of the economy for an extended period.”	“They piously preen on their soap boxes speaking only half of the medical truth without reference or regard for the other half of the equation, which is the very real mortal dangers associated with the closure of the economy for an extended period.”
Whose call is it, anyway? Regional groups of governors are coordinating a timeline for reopening their states. President Trump, however, insists only he has “total” authority to reopen the economy. Expect a clash between advice from federal and state officials.	Whose call is it, anyway? Regional groups of governors are coordinating a timeline for reopening their states. President Trump, however, insists only he has “total” authority to reopen the economy. Expect a clash between advice from federal and state officials.
Does it matter? As Jim Tankersley of The Times writes, the economy began to slow before the lockdowns were announced, as nervous consumers stayed home because of their own concerns about the virus. The data suggests that those same worries will keep economic activity subdued after restrictions are lifted.	Does it matter? As Jim Tankersley of The Times writes, the economy began to slow before the lockdowns were announced, as nervous consumers stayed home because of their own concerns about the virus. The data suggests that those same worries will keep economic activity subdued after restrictions are lifted.
Treasury Secretary Steven Mnuchin is reportedly holding firm on conditions that airlines must accept in order to receive taxpayer rescue money, according to Bloomberg. It may provide a template for aid to other industries.	Treasury Secretary Steven Mnuchin is reportedly holding firm on conditions that airlines must accept in order to receive taxpayer rescue money, according to Bloomberg. It may provide a template for aid to other industries.
Among the Treasury Department’s demands are that 30 percent of assistance comes in the form of loans that are repaid within five years. The U.S. government would also receive equity warrants worth around 10 percent of the loans — meaning that carriers would give taxpayers stock.	Among the Treasury Department’s demands are that 30 percent of assistance comes in the form of loans that are repaid within five years. The U.S. government would also receive equity warrants worth around 10 percent of the loans — meaning that carriers would give taxpayers stock.
Airlines, their unions and Democratic lawmakers are irate, saying this wasn’t the intent of the billions in aid allocated to airlines in the $2 trillion coronavirus bill passed last month.	Airlines, their unions and Democratic lawmakers are irate, saying this wasn’t the intent of the billions in aid allocated to airlines in the $2 trillion coronavirus bill passed last month.
• Carriers may not have much of a choice. United and Delta are reportedly considering selling frequent-flier miles back to their credit card partners at a discount to raise cash, according to The Wall Street Journal.	• Carriers may not have much of a choice. United and Delta are reportedly considering selling frequent-flier miles back to their credit card partners at a discount to raise cash, according to The Wall Street Journal.
The Treasury Department’s demands “may set the tone” for other bailout negotiations, CNBC adds. Policymakers are mindful of the criticism that followed the bailouts of automakers and banks during the 2008 financial crisis.	The Treasury Department’s demands “may set the tone” for other bailout negotiations, CNBC adds. Policymakers are mindful of the criticism that followed the bailouts of automakers and banks during the 2008 financial crisis.
In other airline news: Delta is temporarily changing how passengers board, with travelers in the back going first to minimize contact with others.	In other airline news: Delta is temporarily changing how passengers board, with travelers in the back going first to minimize contact with others.
SoftBank was always expected to take a big hit from its $100 billion Vision Fund, as the coronavirus whacks its investments. Now, Masa Son’s tech conglomerate has put a number to the pain — and it’s big.	SoftBank was always expected to take a big hit from its $100 billion Vision Fund, as the coronavirus whacks its investments. Now, Masa Son’s tech conglomerate has put a number to the pain — and it’s big.
The Vision Fund is expected to have lost nearly $17 billion in the group’s the most recent fiscal year, which ended in March, “due to the deteriorating market environment.” What happened? Just take a look at the fund’s portfolio, which is heavily concentrated in money-losing ride-hailing and hospitality companies that were hit hard by the pandemic. That’s on top of other bad bets made outside the fund, like WeWork and the now-bankrupt satellite company OneWeb.	The Vision Fund is expected to have lost nearly $17 billion in the group’s the most recent fiscal year, which ended in March, “due to the deteriorating market environment.” What happened? Just take a look at the fund’s portfolio, which is heavily concentrated in money-losing ride-hailing and hospitality companies that were hit hard by the pandemic. That’s on top of other bad bets made outside the fund, like WeWork and the now-bankrupt satellite company OneWeb.
~~Updated June 5, 2020~~	Updated June 12, 2020
	Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.
So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.	So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.
A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.	A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.
The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April.	The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April.
Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission.	Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission.
Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home.	Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home.
States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.	States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.
Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.
Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.	Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.
If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)	If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)
Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications.	Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications.